Canada: How To Claim Moving Expenses

In these days of soaring home prices and growing transaction
expenses, such as land transfer taxes and moving costs, it would be
an understatement to say that every new owner could use some sort
of a financial break. Happily, for those of you who moved last year
to be closer to work or school, there may be such a break
available. And with tax filing time approaching, it makes sense to
take advantage of the moving expense deduction. Here's how.

Do you qualify?

Generally, a deduction for moving expenses is potentially
available in most situations where you move to a new work location
(even if you stay with the same employer) or if you move to attend
a post-secondary institution on a full-time basis.

The rule is that the move must bring you at least 40 kilometres
closer to your new place of work or school. Historically, the rule
was that the distance between your old home and your new home was
to be measured "as the crow flies;" but a tax case
(Giannakopoulos) came out years back indicating that the
correct approach would be to use the shortest normal route open to
the public (including ferries and rail lines, where
applicable).

What you can claim

If you meet this rule, then you can deduct certain expenses
incurred as part of your move. (File Canada Revenue Agency Form
T1-M with your tax return when claiming the expenses.) Here are the
expenses that will be deductible:

Travel costs (including reasonable
amounts for meals and lodging) in the course of moving you and
members of your household.

The cost of transporting or storing
household effects in the course of moving –including items
such as boats and trailers.

The cost of meals and lodging near
the old or new home for you and members of your household, for a
period of up to 15 days.

The cost of cancelling a lease for
the old house (if you rent).

Selling costs in respect of the sale
of the old house (if you own), including real estate commissions
(this would also include, for example, mortgage penalties for early
discharge, legal fees).

Where the old home is being sold
because of the move, the cost of legal fees relating to the
purchase of a new home, as well as any tax, fee or duty (other than
any goods and services tax or value-added tax). This includes
transfer or title registration taxes (and if you happen to be
buying in Toronto, this could be important, because you'll be
subject to both provincial and municipal land transfer
tax).

Certain costs of maintaining a vacant
former home (including mortgage interest, property taxes,
insurance, and the cost of utilities), to a limit of $5,000.

Costs of revising legal documents to
reflect the address of your new residence, replacing drivers'
licenses and non-commercial vehicle permits (excluding any cost for
vehicle insurance), and connecting or disconnecting utilities.

But wait...there's more

This list has generally been viewed as all that you could claim
as part of the moving expenses. However, a case that came out in
2010 (Van Zant v. The Queen) seemed to suggest otherwise.
In fact, the Court in this case stated that since the definition of
moving expenses in the Income Tax Act uses the word
"includes" when listing the above items, this list is not
meant to be exhaustive.

In the case, the payer attempted to deduct a long list of
expenses, including, among other things, costs of cartons and tapes
used for packing, costs of phone cards, costs of a table fan and
lights for her motorhome, which she used as temporary living space,
and – my favorite – the cost of alcohol. (Although the
case does not expand on what basis alcohol was claimed, as someone
who has experienced the pains of moving, I know a bottle of wine or
two would definitely have helped ease the pains of packing and
unpacking.)

Although in the subject case the judge did not allow all of the
expenses claimed by the taxpayer, the case is of interest for the
very fact that moving expenses may not necessarily be limited to
the list noted above (and per the relevant tax sections in the
Income Tax Act).

How to claim meal and vehicle expenses

With respect to moving expenses, you can choose to claim meal
and vehicle expenses using one of two methods.

First, you can claim these expenses in accordance with actual
receipts and records of the expenses incurred.

Alternatively, meal and/or vehicle expenses can be calculated
using a simplified method. In the case of meals, a flat rate per
meal is claimed. For vehicle expenses, a record must be kept of the
number of kilometres driven in the course of moving. The amount
that may be claimed for vehicle expenses is determined by
multiplying the number of kilometres travelled in the course of
moving by a flat per-kilometre rate.

Information on the current rate per meal and per kilometre is
available from the Canada Revenue Agency's "Tax
Information Phone Service" (TIPS) at 1-800-267-6999 or on the
CRA website at www.cra.gc.ca/tips .

Calculate both ways before filing

You should calculate your expenses using both methods before
filing. The differences between the two methods can be dramatic.
Note, too, that if you file using actual receipts, the CRA usually
will not permit an amendment to the tax return.

Restrictions and exceptions

Of course, no deduction would be complete without certain
restrictions:

Students may also deduct moving
expenses, but in this case, special rules apply. Deductions may be
claimed if the student moves to take a job (this includes a summer
job). But if a student moves to attend a post-secondary school full
time, deductions can be taken only against taxable scholarships and
research grants.

In the year of relocation,
expenses can be deducted only against income made in the new
location. However, undeducted moving expenses can be applied to
next year's tax return against future income in the new job or
business. (This would be particularly helpful if the move was late
in the year.)

Of course, moving expenses that are
paid for or reimbursed by the employer are not deductible. However,
an employee may, if desired, include partial reimbursements in
income, then deduct moving expenses that are eligible for
deductions. This will be beneficial if eligible moving expenses
exceed the amounts paid by the employer.

On July 18, 2017, Canada's Minister of Finance released proposed changes to the Income Tax Act (Canada) that, if implemented, will mark one of the most significant reforms to Canada's tax system for business income in decades –

On July 18, 2017 the Department of Finance released a consultation paper, Tax Planning Using Private Corporations, targeting the following three tax planning strategies involving the use of private corporations:

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